ITV Reaches Highest in Five Years on Takeover Talk: London Mover

By Tim Farrand -
Feb 18, 2013

ITV Plc, owner of the U.K.’s most-
watched commercial TV station, rose to the highest price since
May 2007 on speculation that it may become a takeover target or
unveil a buyback plan with its full-year results.

ITV climbed 2.8 percent, taking the two-day advance to 6.6
percent. Citigroup Inc. included the stock on a list of European
companies that may become bid targets or start share buybacks
because of their strong balance sheets and cash flow. Nomura
reiterated its buy recommendation on the stock, lifting its
price target to 130 pence from 125 pence.

The $16 billion takeover of Virgin Media Inc. by
billionaire John Malone’s Liberty Global Inc., announced this
month, was the largest media transaction since 2007 and has
stirred speculation that there will be more acquisitions in
media, technology and telecommunications.

“Conditions are in place for a pick-up in corporate
activity,” analysts at Citigroup wrote in a note to clients
dated Feb. 14. “We think we are at the start, not the end, of
an M&A and re-leveraging cycle.”

ITV rose 3.30 pence to 120.90 pence at the 4:30 pm close in
London. ITV is the third-best-performing stock over the past six
months among companies on the Stoxx 600 Media Supersector Index,
with a gain of about 40 percent. The index of 28 companies has
advanced 6.8 percent in that period.

Buyback Focus

“The key focus for ITV’s upcoming results will not be the
full-year 2012 financials, but any confirmation of a potential
buyback,” William Mairs, a Nomura analyst, wrote in a note
dated Feb. 15. Recent activity, including acquisitions, implies
“a lower potential buyback range of 150-200 million pounds.”

Nomura raised its 2013 forecast for net advertising
revenue, saying there are signs that the new year has started
well with media buyers indicating January was up 5 percent while
February is showing an increase of 2 percent and March a decline
of 1 percent.

“We remain positive on ITV as it continues to deliver well
against its transformational plan,” Mairs wrote, adding that
there is “scope” for cash returns.

ITV is scheduled to report full-year results on Feb. 27. It
will probably report an increase in pretax profit to about 445
million pounds ($688 million), according to the median estimate
of analysts in a Bloomberg survey. ITV posted pretax profit of
327 million pounds in 2011 and free cash flow of 322 million
pounds.